SA’s GDP still muddling through
SA’s weak growth rate shows how far it still has to go to create a sustainable and competitive economy
The SA economy grew slightly ahead of consensus expectations last year, with real GDP growth at 1.4% in the final quarter, and 0.8% for 2018 as a whole. But this is still below the population growth rate, suggesting that the average South African’s standard of living continues to decline.
Though most economic data this year has been desultory, the consensus is that the economy will quicken to 1.3%-1.5% this year on improved private fixed investment and household expenditure.
"The fourth-quarter GDP data will provide a reasonably strong carry-over into 2019," says Capital Economics chief emerging markets economist William Jackson. "More fundamentally, with financial conditions having loosened and inflation set to decline in the coming months, domestic demand should strengthen. All told, we expect the economy to expand by 1.5% over the course of 2019."
The economy grew by 0.4% in 2016 and 1.4% in 2017. The National Treasury is forecasting growth to recover steadily to 2% by 2021.
Stats SA says the main contributor to overall growth last year was the finance, real estate and business services sector, which expanded by 1.8%. The second-largest contributor was the government, which grew 1.3%. These two sectors contributed 0.4 and 0.2 of a percentage point respectively to the full-year growth rate of 0.8%.
The mining and construction industries have sunk into a recession, however. In fact, the construction industry suffered its worst year in two decades, according to the GDP figures. Annual production slumped 1.2%, the industry’s biggest annual fall since 1999, when activity fell by 1.4%.
Mining was hit as hard, with production contracting 1.7% year on year. The sector has been battling high input costs, low commodity prices, strikes and, more recently, load-shedding.
Copper mining had an especially shocking year: production plummeted 28.5%, the biggest fall since recording of the current series began in 1981. Gold production was down 14.5%, the worst annual slump since 2008.
Agriculture contracted 4.8% after field crops and horticultural products did badly in the first two quarters.
The rand rallied after the release of the data, probably because of the slightly positive surprise.
"There are encouraging signs," says Business Unity SA (Busa) CEO Tanya Cohen. "Busa remains cautiously optimistic that — with the right policy mix; the alleviation of uncertainty; reforms in state-owned entities, particularly Eskom; and the political will to implement economic reforms — SA can turn a corner."